1. What is Expense Ratio?

The Expense Ratio (ER) is the percentage of a mutual fund's assets that is used to cover the fund's operating expenses. It includes management fees, administrative costs, and other operational expenses. In India, SEBI regulates the maximum expense ratios that mutual funds can charge.

2. How Does the Calculator Work?

The calculator uses the Expense Ratio formula:

Where:

• \( ER \) — Expense Ratio in percentage
• \( \text{Total Expenses} \) — Total annual expenses of the fund (INR)
• \( \text{Average AUM} \) — Average Assets Under Management (INR)

Explanation: The formula calculates what percentage of the fund's assets are used for expenses annually.

3. Importance of Expense Ratio

Details: Expense ratio directly impacts investor returns. A lower expense ratio means more of the fund's returns are passed on to investors. In India, expense ratios typically range from 0.1% for index funds to 2.5% for actively managed equity funds.

4. Using the Calculator

Tips: Enter total expenses and average AUM in INR. Both values must be positive numbers. The calculator will compute the expense ratio as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good expense ratio in India?
A: For equity funds, under 1.5% is generally good. For debt funds, under 1% is preferable. Index funds should have expense ratios below 0.5%.

Q2: Does SEBI regulate expense ratios?
A: Yes, SEBI sets upper limits based on fund type and AUM. For equity funds, the maximum is 2.25% for the first ₹100 crore AUM.

Q3: How often is expense ratio charged?
A: The expense ratio is charged daily and deducted from the fund's NAV (Net Asset Value).

Q4: Does expense ratio include GST?
A: Yes, in India the expense ratio includes all costs including GST on management fees and other charges.

Q5: Can expense ratio change over time?
A: Yes, expense ratios may decrease as AUM grows due to economies of scale. SEBI also periodically revises expense ratio limits.